Question 1

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

Accepted Answer

A)   and wealth increase by $100.
B)   and wealth decrease by $100.
C)   increase by $100 while wealth does not change.
D)   decrease by $100 while wealth decreases by $100.E) C) and D)
F) All of the above

Question 2

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Accepted Answer

A)   would increase.
B)   would not change.
C)   would decrease.
D)   could do any of the above.E) A) and B)
F) C) and D)

Question 3

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

Accepted Answer

A)   $5.
B)   $50.
C)   $95.
D)   $950.E) A) and B)
F) None of the above

Question 4

Which of the following is correct?

Accepted Answer

A)   The Fed can control the money supply precisely.
B)   The amount of money in the economy does not depend on the behavior of depositors.
C)   The amount of money in the economy depends in part on the behavior of banks.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 5

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Accepted Answer

A) True 
 B)False

Question 6

The discount rate is

Accepted Answer

A)   the rate at which public banks lend to other public banks.
B)   the rate at which the Fed lends to banks.
C)   the percentage difference between the face value of a Treasury bond and what the Fed pays for it.
D)   the percentage of deposits banks hold as excess reserves.E) A) and D)
F) B) and C)

Question 7

The amount of currency per person in the United States is about

Accepted Answer

A)   $125.
B)   $300.
C)   $2,500.
D)   $3,700.E) A) and C)
F) None of the above

Question 8

Compare the Board of Governors and the Federal Open Market Committee.

Accepted Answer

The Board of Governors runs the Federal ...

Question 9

Which of the following is not included in M1?

Accepted Answer

A)   a $5 bill in your wallet
B)   $100 in your checking account
C)   $500 in your savings account
D)   All of the above are included in M1.E) All of the above
F) A) and B)

Question 10

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Accepted Answer

A)   a liability for the bank and an asset for Greg's Ice Cream. The loan increases the money supply.
B)   a liability for the bank and an asset for Greg's Ice Cream. The loan does not increase the money supply.
C)   an asset for the bank and a liability for Greg's Ice Cream. The loan increases the money supply.
D)   an asset for the bank and a liability for Greg's Ice Cream. The loan does not increase the money supply.E) None of the above
F) A) and D)

Question 11

Credit card limits are included in

Accepted Answer

A)   M1 but not M2.
B)   M2 but not M1.
C)   M1 and M2.
D)   neither M1 nor M2.E) B) and C)
F) None of the above

Question 12

The Federal Reserve is a privately operated commercial bank.

Accepted Answer

A) True 
 B)False

Question 13

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Accepted Answer

A) True 
 B)False

Question 14

In the special case of the 100 percent-reserve banking the money multiplier is

Accepted Answer

A)   1 and banks create money.
B)   1 and banks do not create money.
C)   2 and banks create money
D)   2 and banks do not create money.E) A) and D)
F) C) and D)

Question 15

Consider the following traders who meet.  Which, if any, pairs of traders has a double coincidence of wants?

Accepted Answer

A)   Bob with Alice
B)   Ted with Alice
C)   Bob with Mary, Ted with Bob, and Ted with Alice
D)   None of the pairs above has a double coincidence of wants.E) B) and C)
F) None of the above

Question 16

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 20 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

Accepted Answer

A)   It falls by $45 billion.
B)   It falls by $52 billion.
C)   It falls by $55 billion.
D)   None of the above is correct.E) A) and B)
F) C) and D)

Question 17

Given the following information, what are the values of M1 and M2? Small time deposits
$1,100 billion
Demand deposits and other checkable deposits
$800 billion
Savings deposits
$1,350 billion
Money market mutual funds
$900 billion
Traveler's checks
$30 billion
Large time deposits
$750 billion
Currency
$150 billion
Miscellaneous categories in M2
$40 billion

Accepted Answer

A)   M1 = $830 billion, M2 = $4,370 billion.
B)   M1 = $980 billion, M2 = $4,370 billion.
C)   M1 = $980 billion, M2 = $3, 390 billion.
D)   M1 = $1,020 billion, M2 = $3,390 billion.E) B) and D)
F) All of the above

Question 18

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Accepted Answer

A) True 
 B)False

Question 19

The interest rate the Fed charges on loans it makes to banks is called

Accepted Answer

A)   the prime rate.
B)   the federal funds rate.
C)   the discount rate.
D)   the LIBOR.E) All of the above
F) None of the above

Question 20

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Accepted Answer

A)   buying bonds. This buying would reduce reserves.
B)   buying bonds. This buying would increase reserves.
C)   selling bonds. This selling would reduce reserves.
D)   selling bonds. This selling would increase reserves.E) B) and C)
F) A) and D)

Exam 11: The Monetary System

The Federal Reserve is a privately operated commercial bank.

Correct Answer
verified

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Correct Answer
verified

The discount rate is

Correct Answer
verified

Compare the Board of Governors and the Federal Open Market Committee.

Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct Answer
verified

Correct Answer
verified

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Correct Answer
verified

Credit card limits are included in

Correct Answer
verified

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct Answer
verified

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Correct Answer
verified

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Correct Answer
verified

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

Correct Answer
verified

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

Correct Answer
verified

The interest rate the Fed charges on loans it makes to banks is called

Correct Answer
verified

Correct Answer
verified

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

Correct Answer
verified

Which of the following is not included in M1?

Correct Answer
verified

The amount of currency per person in the United States is about

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

In the special case of the 100 percent-reserve banking the money multiplier is

Correct Answer
verified

Exam 11: The Monetary System

The Federal Reserve is a privately operated commercial bank.

Correct AnswerverifiedShow Answer

Bank runs and the accompanying increase in the money multiplier caused the U.S. money supply to rise by 28 percent from 1929 to 1933.

Correct AnswerverifiedShow Answer

The discount rate is

Correct AnswerverifiedShow Answer

Compare the Board of Governors and the Federal Open Market Committee.

Correct AnswerverifiedThe Board of Governors runs the Federal ...View AnswerShow Answer

A bank loans Greg's Ice Cream $250,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the central bank in some country lowered the reserve requirement, then the money multiplier for that country

Correct AnswerverifiedShow Answer

Credit card limits are included in

Correct AnswerverifiedShow Answer

If the federal funds rate were above the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Correct AnswerverifiedShow Answer

Monetary policy is determined by a committee whose voting members include all the presidents of the regional Federal Reserve Banks.

Correct AnswerverifiedShow Answer

In order for currency to be widely used as a medium of exchange, it is sufficient for the government to designate it as legal tender.

Correct AnswerverifiedShow Answer

A bank's reserve ratio is 5 percent and the bank has $1,000 in deposits. Its reserves amount to

Correct AnswerverifiedShow Answer

Consider the following traders who meet. Which, if any, pairs of traders has a double coincidence of wants?

Correct AnswerverifiedShow Answer

The interest rate the Fed charges on loans it makes to banks is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a bank uses $100 of excess reserves to make a new loan when the reserve ratio is 20 percent, this action by itself initially makes the money supply

Correct AnswerverifiedShow Answer

Which of the following is not included in M1?

Correct AnswerverifiedShow Answer

The amount of currency per person in the United States is about

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

In the special case of the 100 percent-reserve banking the money multiplier is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified
The Board of Governors runs the Federal ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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